Keppel Seeks New Non-Rig Orders for Brazil Yards: Southeast Asia

A Keppel Corp. employee stands next to valve wheels and pipework on the deck of the Transocean Siam Driller jackup rig, built for Transocean Ltd., during a naming ceremony at the Keppel FELS shipyard in Singapore, on Feb. 2, 2013. Photographer: Munshi Ahmed/Bloomberg

July 22 (Bloomberg) -- Keppel Corp., the world’s largest
oil-rig maker, will focus on building more offshore production
and support vessels in Brazil as competition from China cuts
prices for its main product.

Brazil’s offshore development boom means Keppel’s yard is
now mainly utilized for building rigs for state-owned Petroleo
Brasileiro SA. The Singapore-based company is setting up a
second yard to meet demand for other vessels and to offer repair
and conversion work, Chief Executive Officer Choo Chiau Beng
said in an interview on July 19.

“We’re not interested to take a lot more work than the six
semis from Petrobras because we do not want to overload our
shipyard,” Choo said, referring to an order to build semi-submersible rigs for state-owned Petroleo Brasileiro SA. “We
want to leave some capacity for our other customers” who need
floating production, storage and offloading platforms, or FPSOs,
and for oil-rig repairs, he said.

Demand for offshore drilling and production units is
expected to increase as Brazil competes for investments at a
time when producers are using new technologies to extract crude
from shale beds across the U.S. and explorers are expanding
activity off the coast of Africa. South America’s largest
economy targets to double its crude production by 2020.

“The next big story there will be FPSOs because ultimately
after you drill and discover oil, you’ll need FPSOs to produce
it,” Vincent Fernando, the head of Asean research at Religare
in Singapore, said in a phone interview on July 19. “They are
looking at all the different ways they can tap the energy value
chain, they don’t only need to build rigs.”

Ramping Up

Keppel signed a $4.1 billion order in August to build five
semi-submersible rigs for Sete Brasil Participacoes SA, an
affiliate of Petrobras. The state oil producer, which is
developing the largest oil discovery in the Americas in three
decades off the country’s coast, is spending $236.5 billion as
part of its five-year investment plan.

Choo said the company is in the process of ramping up
production at its Brazilian yard specializing in offshore
support vessels. Keppel had orders amounting to S$13.1 billion
($10 billion) as of June, with deliveries stretching into 2019.

Shares of Keppel climbed 0.5 percent to S$10.80 at the
close in Singapore, the biggest increase in a week.

Property Fund

Keppel is also diversifying other businesses. Alpha
Investment Partners, Keppel’s real estate investment manager,
closed its fund after raising $1.65 billion from investors that
include pensions and sovereign wealth funds in South Korea, Abu
Dhabi, Brunei and the Netherlands, Choo said.

While Keppel is facing competition from yards in China for
offshore projects, Choo expects customers to lay more emphasis
on having products delivered on time. Clients had been asking
Keppel to complete rigs that the Chinese yards were unable to
finish, he said.

“Chinese yards were desperate because they ran out of
conventional ships to build,” Choo said. “They were offering
crazy terms to attract customers.”

China, the world’s biggest shipbuilding nation, may see a
third of its yards shut down in about five years amid a global
vessel glut, according to the China Association of National
Shipbuilding Industry. That has prompted yards to expand into
building offshore projects.

Choo, 65, will retire at the end of this year and Chief
Financial Officer Loh Chin Hua, who used to run Alpha, will take
over from January.